Highlights

  • As the 30th Conference of the Parties (COP30) to the United Nations Framework Convention on Climate Change approaches, we anticipate that discussions around private investment and government fiscal budgets could revert to focusing on climate action. But with climate diplomacy at a crossroads, the conference's ability to spur foreign financing and investment for climate initiatives — especially in emerging and frontier markets like Latin America — is at risk.
  • Latin America’s energy transition plans have faced challenges in attracting foreign investment or fiscal budget space due to uncertain economic environments. However, they have not been fully derailed by shifting attitudes toward climate change in the US.
  • Despite the decrease in sustainable bond issuance in 2025, Latin America is likely to remain an active player in the sustainable debt market and a target for climate financing from multilateral development banks. An increasing focus on nature is helping countries in the region, particularly those with the Amazon rainforest within their borders, unlock new nature finance opportunities. We expect nature finance and nature (loss) risks to be part of COP30 discussions.

Authors

Rafael Janequine | Latin America Lead Analyst – Sustainable Finance, S&P Global Ratings
Marion Amiot | Head of Climate Economics, S&P Global Ratings
Victor Laudisio | Nature Specialist, Sustainability Research & Methodology, S&P Global Ratings 
Elijah Oliveros-Rosen | Latin America Economist, S&P Global Ratings

Contributors

Esther Whieldon | Senior Writer, S&P Global Sustainable1
Harumi Hasegawa | Latin America Economist, S&P Global Ratings 

Although climate policy commitments and investments have weakened due to rising geopolitical risks (see 'Net-Zero Transition Stutters As Geoeconomic Risks Increase'), the UN's annual climate change conference brings climate and nature action to the forefront of private investment and fiscal expenditure discussions. In November, COP30 will take place in Brazil,  putting Latin America squarely in the spotlight. As we approach this key event, this report provides an overview of both the fiscal landscape and the energy transition story of Latin America. It also outlines the current outlook for the sustainable debt market and climate financing from multilateral development banks in the region.

Latin America's energ transition is advancing

According to S&P Energy latest Base Case scenario , in 2025, the share of fossil fuels in Latin America was the lowest compared to other regions (see Chart 1). The region's energy system is expected to rely on fossil fuels for 57% of total primary energy demand by 2050, down from 63% in 2025.  

In addition to the historical development of hydropower, driven by the region’s favorable topography and hydrography, recent advances in subsidies and the establishment of or updates to regulatory frameworks for wind, solar and biomass have facilitated the expansion of these energy sources. However, Latin America also has sizeable proven oil and gas reserves that have yet to begin production, as well as unexplored areas. Although the relative share of fossil fuel spending has been declining in recent years, energy spending remains crucial and continues to attract foreign investment.

The electricity mix in Brazil is among the cleanest in Latin America and the G20. As of 2024, about 85% of its installed power capacity came from renewable sources, according to the International Energy Agency (IEA). However, solar and wind expansion has outpaced grid capacity, causing frequent curtailment. The Federal Court of Accounts, Brazil’s federal audit office, has also highlighted weak institutional coordination and regulatory gaps that threaten timely execution. 

Despite an established decarbonization strategy and carbon markets regulation, recent policy developments have partially derailed the region’s energy transition. These include offshore oil and gas exploration concessions near the Amazon River estuary — awarded to Petrobras, the state-owned oil company, and to subsidiaries of major international oil companies — alongside legislation that eases environmental licensing and policies that extend support for coal and natural gas power. The administration of Brazilian President Luiz Inácio Lula da Silva argues that oil revenues can help finance the energy transition.

Colombia has also advanced its energy transition by expanding nonconventional renewables, launching green hydrogen pilots, enhancing rural electrification, and halting new fossil fuel exploration. Still, execution remains a hurdle. The country is expected to reach only half of its target of nonconventional renewable capacity by 2026 due to permitting delays, grid bottlenecks and local opposition. With progress heavily dependent on private and multilateral financing, investor confidence and political coordination will be essential. 

Chile’s transition remains on track. By 2024, about 65% of installed power capacity came from renewables, and the country has phased out a substantial portion of its coal power capacity. However, grid constraints have led to high curtailment, prompting investments in grid upgrades and battery storage. Chile is also positioning itself as a regional leader in green hydrogen, with several projects in the pipeline. 

Mexico’s energy transition has regained momentum under the new administration. While Mexico has reaffirmed its climate commitments, the government continues to prioritize public-sector control, requiring at least 56% state participation in new projects. Regulatory clarity and efficient permitting will be key to advancing the country’s transition goals. 

Peru’s energy transition includes ambitious targets, but progress has been modest. Nonconventional renewables remain under 10% of total installed power capacity, well short of the 2030 goal of 20%. Investment in new projects has grown slowly, partly due to political uncertainty. Clearer regulation, stronger grid infrastructure, and improved institutional capacity are needed to accelerate progress. 

Argentina is nearing its target of 20% nonconventional renewable electricity by 2025. Nonetheless, its continued reliance on fossil fuels and infrastructure constraints challenges longer-term ambitions. Sustained policy support and a more robust investment framework will be essential to meet its 2030 and 2050 goals. 

The silver lining in the region is that compared to other emerging and frontier markets, Latin America is relatively well positioned to meet its renewable energy investments goals under the IEA’s Stated Policies Scenario or Sustainable Development Scenario scenarios (see chart 2 and Development Needs Explain Transition Costs In Emerging Markets). Colombia, Brazil and Peru have a high share of renewables in their energy mix already, which means they have lower investment needs in terms of GDP to reach renewable energy targets.

IEA’s Energy Scenarios

IEA scenarios are projections developed by the International Energy Agency that outline various possible future energy pathways based on different assumptions about policies, technologies, and market developments.

  • The Stated Policies Scenario (STEPS) provides a sense of the prevailing direction of energy system progression, based on a detailed review of the current policy landscape.

  • The Sustainable Development Scenario (SDG) describes the broad evolution of the energy sector that would be required to reach the U.N.'s key energy-related goals, including the climate goal of the Paris Agreement (SDG 13), universal access to modern energy by 2030 (SDG 7), and a dramatic reduction in energy-related air pollution and the associated impacts on public health (SDG 3.9). The SDG would limit the global temperature rise to below 1.8 degrees Celsius with a 66% probability if carbon dioxide emissions remain at net zero after 2070.

Looking ahead, Chile is dedicating around 4% of its total investment to clean energy spending every year according to S&P Global Energy estimates, which is similar to countries like Germany (see chart 3). Comparatively, Brazil’s clean energy investments are closer to 2% of the total and Mexico remains much lower. 

Another key area where Latin American countries stand to benefit is critical minerals exports. Specifically, Chile and Peru are amongst the world leading exporters of copper and lithium. As more countries globally adopt renewable energy and clean technologies such as electric vehicles, critical mineral exports from state-owned entities and tax collection from the sector could help generate revenues to finance growth and clean energy spending.

Despite advances, there are evolving domestic financing and macroeconomic constraints

As Latin America competes with a potentially lower international pool of capital, its domestic capacity to fund energy transition projects has been more constrained. Higher long-term borrowing costs, especially since the COVID-19 pandemic, have increased interest rate burdens across the region, reducing fiscal space for spending in areas such as climate-related projects. Among a select number of Latin American economies, the median government now spends over 16% of total fiscal revenues on interest cost, up from 11% before the pandemic (see chart 5). In the current environment of global economic uncertainty, fiscal consolidation is facing significant political challenges, which in our view means that interest burdens are likely to remain high in the coming years in most economies in Latin America.

Another challenge for Latin America is the balance between short-term economic growth objectives with long-term energy transition goals. Economic growth in the region has underperformed other emerging markets, and income per capita convergence with advanced economies has stalled over the greater part of the last two decades (see chart 6).  As a result, if economic growth remains weak, achieving energy transition goals might not be a priority for many governments in Latin America. Other goals that more immediately improve standards of living —  such as services like security, health and education, and infrastructure such as water and sewage, may take precedence over energy transition goals.

The outlook for sustainable debt in Latin America

Unfavorable market conditions driven by economic uncertainty and geopolitical risks contributed to the decline in sustainable bond issuance in the first half of 2025 in Latin America. For the remainder of the year, we do not project a significant recovery. Looking at full-year 2025, we expect issuance to range between $20 billion to $30 billion, including $9 billion for the first half of 2025. In the medium term, the ongoing decline in interest rates at most Latin American central banks, along with a continued emphasis on national economic and energy transition agendas, could help restabilize the market and promote growth. We expect that Brazil and Mexico are likely to continue leading local-currency sustainable bond issuance, given that they represent 80% of such issuances in the region. Despite an increasing number of sustainable financing frameworks released by Chilean and Colombian issuers, local-currency issuance is still limited in these countries.

Moreover, the establishment of local sustainable finance taxonomies and other voluntary guidelines for sub-labeled debt — including blue bonds, nature financing, and Amazonia bonds — offers valuable technical support and promotes a more transparent and supportive regulatory environment. For example, Chile and Paraguay launched local taxonomies this year, and Brazil will launch its sustainable finance taxonomy at COP30. Furthermore, we have also seen some jurisdictions such as Mexico adding taxonomy alignment to their sustainability disclosure requirements.

Nature Finance and COP30 in Latin America

Latin America is home to some of the world's most critical ecosystems, including the Amazon rainforest, where COP30 will be held (specifically, Belém, in the Brazilian state of Pará). This region plays a vital role in reversing global trends of biodiversity decline. An increasing spotlight on nature is helping countries in Latin America, particularly those with the Amazon rainforest in their borders, unlock nature finance opportunities. For example:

  • Colombian and Brazilian banks issued the world’s first biodiversity-focused bonds in late 2024 and 2025, while Brazilian pulp and paper leader Suzano SA used a biodiversity-related key performance indicator (KPI) in its 2025 sustainability-linked loan. Brazilian forest restoration company re.green signed a biodiversity loan via Brazil’s federal government’s Fundo Clima. Chile also updated its sustainability-linked framework with a new nature KPI in July. 

  • The World Bank published guidelines for Amazonia Bonds in June 2025. Amazonia Bonds are part of the sustainable debt market, covering financing where 100% of proceeds are allocated to green or social projects in the Amazon region. 

  • The Tropical Forest Forever Facility is an investment fund for global tropical forest restoration and conservation being promoted by Brazil at COP30.

  • Latin America and the Caribbean have been an area of focus for debt-for-nature swaps, which are financial agreements to relieve the debt burden of an issuer while supporting environmental conservation. From 2021 to 2025, four sovereigns — Barbados, Belize, El Salvador and Ecuador (in two different swaps) exchanged $5 billion in commercial debt for new loans worth $3.1 billion and marine or river conservation commitments.

Latin America as a recipient of climate finance from multilateral development banks (MDBs)

MDBs have played an important role in climate finance in Latin America and in most other emerging and frontier economies, either by providing financing directly through loans and grants, indirectly through loan guarantees, or via derisking (blended finance) initiatives that increase participation of private sector financing. According to a joint report on MDB climate finance published in 2024, close to half of MDB lending is directed to climate finance. The Inter-American Development Bank Group, for example, directed 46% of its total lending operations towards climate finance in 2023 (the latest data available in the most recent annual joint MDB report).

That said, the US administration has stated that climate-related financing activities undertaken by  the International Monetary Fund and World Bank depart from their core mandates. US officials have called for a recalibration in the financing activities of MDBs that is more consistent with their mandates. This recalibration, if it materializes, could lower the pool of available MDB financing for climate-related projects in the region. On the other hand, emerging and frontier markets call for reforms of such multilateral institutions. In the meantime, MDBs with non-US shareholders, such as the Global Green Growth Institute, have taken the opportunity to expand their presence in Latin America, albeit with smaller nominal amounts compared to the former MDBs.

Looking forward

COP30 in Brazil will draw the world’s attention to Latin America at a time of increasing geopolitical polarization. The region has critical opportunities to continue accelerating its energy transition and producing the essential minerals needed to support the transition. This could be achieved by leveraging the region's access to international sustainable debt markets, by utilizing local market taxonomies and by accessing MDB resources.

We believe that a key point to watch at COP30 will be how discussions around private investment and government fiscal budgets will refocus attention on climate action. Additionally, as nature and climate change become more intertwined in diplomacy discussions, it is important to observe how nature risks will be treated at COP30, as well as discussions aimed at nature financing projects that aim to reverse biodiversity loss trends.

Location

Global
Ahead of COP30, a changing landscape for Latin America